Russia's Rosneft looks to Vietnam experience to help global expansion

VUNG TAU, Vietnam (Reuters) - With sanctions barring Russia’s largest oil producer from offshore extraction with Western companies, Rosneft is looking to its operations in Vietnam for the experience needed to expand its global reach.

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The Southeast Asian country is a traditional ally of Russia, and Kremlin-controlled Rosneft is part of a consortium with Petrovietnam and India’s ONGC which last year produced almost 3 billion cubic meters (bcm) of gas.

The consortium provides almost a tenth of Vietnam’s electricity needs and last year also produced 65,000 tonnes of gas condensate, mainly for the domestic market but some of which was exported to Singapore.

“The project in Vietnam allows us to develop operator skills working on the shelf, and is also a platform for the possible growth of business in other countries of Southeast Asia,” said Christopher Einchcomb, director of Rosneft’s upstream foreign projects support department.

“I am sure that the experience gained in Vietnam will be used not only for the company’s work offshore Vietnam but acquired competencies will be applied in the planning and implementation of ‘exploration and production’ projects in other remote regions of the world,” he said.

U.S. sanctions imposed on Moscow after its annexation of Crimea in 2014 have prohibited Western companies from working in Russian Arctic oilfields, producing tight oil or deepwater exploration in the country.

U.S. major ExxonMobil decided to withdraw from sanctions-hit joint projects with Rosneft this year.

Mervyn Goddings, head of Rosneft subsidiary RN-Vietnam, said the sanctions have forced the company to become more cautious and more proficient.

“There is mild inconvenience. It means that we have to be a little more astute in how we operate, where we buy from. There is plenty of opportunities, plenty of diversity. It just means that we have to become more efficient, more effective and a better operator,” he said.

“No experience is ever wasted. So, the lessons that we learn here are carried over, We are already a part of the greater Rosneft family. We have interchanging personnel. We have Russian staff come and work here,” he said.

Rosneft said that production offshore Vietnam is very profitable. Operational costs to produce gas stand at $1.5 per barrel of oil equivalent, half of what it usually costs the company.

Its Vietnamese operations are a legacy of Anglo-Russian firm TNK-BP, which it bought in 2013 for $55 billion.

Rosneft controls 35 percent at Block 06.1 with initial reserves of 69 bcm of gas and owns a stake of around 33 percent in a pipeline that carries gas and condensate from blocks in the Nam Con Son basin to an onshore power generation facility.

It also operates Block 05-3/11 with initial resources of 28 bcm of gas and 18 million tonnes of gas condensate. Currently, Rosneft performs exploration work there.

Writing by Vladimir Soldatkin; editing by Jason Neely and Adrian Croft